Plains All American Seeks Buyout of PAA Natural Gas
Plains All American Pipeline (PAA) is proposing to acquire PAA Natural Gas Storage (PNG), which owns and operates three natural gas storage facilities in Louisiana, Mississippi and Michigan, in a unit-for-unit exchange valued at approximately $1.39 billion, the companies said Tuesday. PAA already holds a general partner interest and majority equity ownership position in PNG.
“While PAA shares PNG’s positive views about the intermediate- to long-term outlook for natural gas storage, it is difficult to predict the timing and extent of a recovery in natural gas storage market conditions,” said PAA CEO Greg L. Armstrong. “Accordingly, it is clear that the next several years will be challenging for PNG on a stand-alone basis.
“We believe that the proposal provides an attractive opportunity for PNG’s common unit holders to realize a value that reflects an appropriate balance between the intermediate to long term value of PNG’s storage business and the uncertainty associated with a near-term challenging environment.”
PAA is proposing to acquire all of PNG’s outstanding publicly held common units, with total consideration of 0.435 common units of PAA for each PNG unit, in a transaction that would be structured as a merger of PNG with a PAA subsidiary. The proposed consideration represents a value of $22.74 per PNG unit, based on the trailing 10-day average closing price of PAA units through Aug. 26.
PAA owns approximately 28.2 million common units of PNG, which represents approximately 46% of PNG’s issued and outstanding common units. PAA also owns PNG’s general partner, all of PNG’s incentive distribution rights, all of its Series A subordinated units (approximately 11.9 million units) and all of its Series B subordinated units (13.5 million units).
The proposed transaction is subject to the negotiation and execution of a definitive agreement and approval by PAA’s board of directors, a conflicts committee to be established by PNG’s board, and PNG unitholders.
PAA units, which have declined about 12% over the last three months, opened at $51.50 Wednesday, the same as its Tuesday open. PNG units, which had climbed 1.3% during the day Tuesday from $20.81 to $21.09, opened higher Wednesday at $22.57.
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